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Northcliffe sale: a sign of the regional times?

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Roger Nicholson looks at the reasons behind the DMGT sell-off and what it could mean for the future of local papers in the UK

“Goingâ€¦
goingâ€¦ goingâ€¦ gone” – but will the Northcliffe Group be sold outright,
or in parts, or will it go to an intermediate buyer? And is the sale a
metaphor for the future of the regional press, the prelude to a long,
slow death?

There could be many cross-cuts. The whole of
Northcliffe could be sold to a bidder willing to pay the mooted price
of £1.2-£1.6bn. But that might trigger an investigation by the Office
of Fair Trading.

The company could be sold in the same price range to a private equity firm, for later sale, outright or in parts.

In this instance the sum of the parts may well exceed the value of the whole.

Private equity firms are flush, appreciate the media, and would not initially be bothered by the OFT.

Five or 10 years ago there would have been strong US interest. This may still happen, but it is currently less likely.

No related posts.

Knight-Ridder,
one of the biggest US publishers, is itself up for sale. There is talk
of German interest in the UK industry, but the cultural divide would be
a stretch.

Probably the least likely outcome in the present
climate is the purchase of Northcliffe by a UK group with existing
national and regional papers.

A purchase on this scale would
almost certainly attract the attention of the OFT. But, more
importantly, it would hit a psychological wall, which has built up in
the past few years.

Behind the wall lurks the view that nationals and regionals cannot happily co-exist in the same group.

The
stimulus for this viewpoint comes from the disappointing performance of
Trinity Mirror since the regional publisher in effect took over Mirror
Group, which had serious circulation problems. Trinity came along and
failed to fix them, and the Mirror Group is now arguably being
sustained by its Trinity partner.

An earlier Viscount Rothermere
said nationals and regionals did not mix well in the same group. It is
difficult to see why he held this opinion. They have done quite well
together in DMGT since before the Second World War. Whatever the
reasons for selling Northcliffe are, it is not because of conflict
between the national Mail titles and the Northcliffe papers. There is
more conflict between the Metros, which DMGT is expanding, and the
Mails and the Evening Standard. The conflict mantra is handy for DMGT
as it moves out of regionals and invests some of the proceeds in the
growing area of electronic publishing.

Elsewhere there has been a
lot of ownership movement between nationals and regionals, but not much
evidence that close relationships have been either wholly beneficial or
particularly damaging.

This must be true of the DMGTNorthcliffe
relationship over more than 80 years. It was also true of relations in
Thomsons between Times Newspapers and Thomson Regional Newspapers.

Arguably,
there is exposure if both your major assets, national and regionals,
are dependent on advertising revenue. The solution to that challenge is
the development of other interests divorced from advertising, which
Thomsons and DMGT both did successfully.

Similarly, the Pearson
Group ran the Financial Times and the Westminster Regional Group
without problems until the latter was sold; Reed had some regionals
when it owned The Mirror; and the old United Newspapers came out of its
Yorkshire stronghold to buy the Express Group.

A fair-minded
conclusion might be that the benefits of running major national and
regional titles in the same group are not great. The same disciplines
apply but the intensity of the competition in the national industry is
wholly absent from all but a few of the regional titles – the serious
mornings which have to compete, at least for sales, with the nationals.

Equally,
their co-existence in the same group is not obviously harmful beyond
the usual competition between divisions for capital and resources.

If
an outright sale of Northcliffe to a single buyer is unlikely,
attention must turn to a break-up and the sale of individual assets,
either by DMGT or by a private equity owner.

This was the
approach adopted by Thomsons in 1996, when Scotsman Publications went
to the Barclays; Aberdeen Journals to Northcliffe for £80m; and the
rump of TRN to Trinity.

There must be useful further synergies to
be developed between the evening titles in the Midlands box –
Leicester, Nottingham, Stoke, Derby – and Aberdeen Journals Ltd is a
medium-sized jewel in any crown.

AJL publishes the morning Press
and Journal, the Evening Express and other satellite titles. Potential
buyers for AJL need both deep pockets and an understanding of the
culture of the papers and the community.

In the run-up to the US presidential election I drove 2,500 miles across the country, from Kansas to Massachusetts.

Along
the way I picked up all the local papers I could find. Some were
independent, some members of chains, and most served communities of
fewer than 100,000.

I did not need access to their management
accounts to spot what they had in common – what editorial people call
“investment” and management calls “expense” was clearly being squeezed.

With
no serious newspaper competition, that is the long-term response of the
owners of these papers to falling circulation, the internet and the
vagaries of the advertising cycle.

Over the decades, most of the major developments in the UK media have originated in the US.

Whatever
the outcome of the Northcliffe sale, a similar squeeze, combined with
concentration on ultralocal news, is likely to further extend through
the regional industry. It’s not attractive but, like WC Fields said,
better than the alternative.

Roger Nicholson is a former deputy managing director of Aberdeen Journals and managing director of Thomson Regional Newspapers